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Textron Inc. Reports Operating Results (10-Q)

October 25, 2012 | About:
10qk

10qk

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Textron Inc. (TXT) filed Quarterly Report for the period ended 2012-09-29.

Textron Inc. has a market cap of $7.17 billion; its shares were traded at around $25.01 with a P/E ratio of 13 and P/S ratio of 0.6. The dividend yield of Textron Inc. stocks is 0.3%. Textron Inc. had an annual average earning growth of 0.1% over the past 10 years.

Highlight of Business Operations:

During 2012 and 2011, we changed our estimates of revenues and costs on certain long-term contracts that are accounted for under the percentage-of-completion method of accounting. The changes in estimates included in income from continuing operations before income taxes in the third quarter of 2012 and 2011 were $(6) million and $23 million, respectively, ($(4) million and $15 million after tax, or $(0.02) and $0.04 per diluted share, respectively). For the third quarter of 2012 and 2011, the gross favorable program profit adjustments totaled $12 million and $28 million, respectively, and the gross unfavorable program profit adjustments totaled $18 million and $5 million, respectively.

The changes in estimates increased income from continuing operations before income taxes in the first nine months of 2012 and 2011 by $10 million and $47 million, respectively, ($6 million and $30 million after tax, or $0.02 and $0.09 per diluted share, respectively). For the first nine months of 2012 and 2011, the gross favorable program profit adjustments totaled $52 million and $70 million, respectively, and the gross unfavorable program profit adjustments totaled $42 million and $23 million, respectively.

Cost of sales as a percentage of manufacturing revenues was 84.3% and 83.1% in the third quarters of 2012 and 2011, respectively, and 83.1% in both the first nine months of 2012 and 2011, respectively. On a dollar basis, consolidated manufacturing cost of sales increased $162 million, 7%, in the third quarter of 2012, and $629 million, 10%, in the first nine months of 2012, compared with the corresponding periods of 2011, principally due to higher net sales volume in the Bell, Cessna and Industrial segments, partially offset by lower net sales volume at Textron Systems. Cost of sales was favorably impacted at the Industrial segment due to the impact of foreign exchange of $14 million and $57 million, respectively, in the third quarter and first nine months of 2012, largely due to the weakening of the euro.

Operating expenses for the Industrial segment increased $27 million, 4%, in the third quarter of 2012, and $98 million, 5%, in the first nine months of 2012, compared with the corresponding periods of 2011, largely due to $29 million and $132 million, respectively, in higher direct material costs in support of higher sales volume. In the third quarter and first nine months of 2012, operating expenses were also impacted by cost inflation of $6 million and $30 million, respectively, primarily due to higher material and labor costs. These increases in operating expenses were partially offset by a favorable foreign exchange impact of $15 million and $61 million, in the third quarter and first nine months of 2012, respectively, largely due to the weakening of the euro.

Finance segment profit increased $163 million in the first nine months of 2012, compared with the corresponding period of 2011, primarily due to changes in net valuation adjustments of $65 million, lower portfolio losses, net of gains of $31 million and an increase of $25 million due to the resolution of one significant Timeshare account as discussed above. In addition, provision for loan losses decreased by $31 million, mostly due to specific reserving actions taken on several non-captive and captive accounts during 2011 and administrative expense declined by $28 million primarily associated with the exit of the non-captive business. These increases were partially offset by a $20 million decrease attributable to lower average finance receivables of $1.2 billion.

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